Russian elite may be forced to say goodbye to foreign properties

MOSCOW, September 11 (Itar-Tass) —— The Russian elite is about to undergo what some have called “compulsory nationalization” – a ban on having properties and bank accounts abroad. The control of foreign assets of civil servants that the State Duma is about to introduce will reorient the political and business elite towards the interests of developing the country in order to rule out a “double loyalty temptation situation.” Many top civil servants will just step down to opt for a mansion abroad, experts say.

At the just-started autumn session the State Duma will consider a bill of amendments to the law On the Civil Service (authored by members of all factions) that will prohibit all civil servants from having real estate outside Russia or open accounts in foreign banks. The law, should it be adopted, will apply to municipal and federal level officials, including police and security officers, State Duma members and members of the Federation Council. They will have no chance of purchasing securities outside Russia, opening cash accounts or owning properties abroad. The restriction will concern not only civil servants, but also members of their families – spouses and children under age.

The exceptions are few – if the foreign property in question is crucial to performing one’s professional duties, or if the civil servant needs medical and educational services outside Russia. Civil servants will have six months to sell up foreign apartments and houses and transfer accounts to Russia. Violations of this law will be punishable with a fine of five million rubles to ten million rubles or a prison term of up to five years.

The State Duma may consider the bill in the first reading as early as the end of September. In that case the law will take effect as of January 1, 2013.

According to official declarations, 130 high-ranking Russian civil servants have real estate abroad. Among them, First Deputy Prime Minister Igor Shuvalov, who owns properties in the United Arab Emirates and Austria and an apartment in Britain. Deputy Prime Minister, presidential representative in the North Caucasus Federal District, Alexander Khloponin, owns a family home with outbuildings in Italy. And the minister for the affairs of the open government, Mikhail Abyzov, has a garage and an apartment in Britain.

Among the members of the Federation Council there are many of those who have properties abroad. For instance, FC member from Buryatia, Vitaly Malkin, and his wife are co-owners of a plot of land of 20 hectares in Italy. Also, they have a family home in Italy. The senator from the lyanovsk Region, Sergei Bazhanov, and his wife have apartments in Finland and France and a villa in France. And State Duma member Mikhail Slipenchuk, of the United Russia party, owns two family homes having a total floor space of 900 square meters and two plots of land of 1,549 square meters in Congo and an apartment in France (94 square meters).

The country that is most popular with ranking Russian civil servants is Bulgaria, where inexpensive housing is widely available. Italy is second, and Spain, third, where five State Duma members have real estate.

The head of the Civil Initiatives Committee, former finance minister Alexei Kudrin, does not rule out that when the ban takes effect, several federal ministers will resign. “I know that several government members have their own apartments abroad, albeit small ones. I do know that they will rather step down than sell them,” Kudrin told the media on Monday.

Control of the officials’ foreign assets will furnish the basis for what have some dubbed “the nationalization of the elites”, and the people will like this, experts say. “For us it is important to ensure the managerial elite in the bodies of power and the business elite should be oriented towards the interests of the country’s development. There should be no “double loyalty temptation,” State Duma Speaker, United Russia General Council Presidium’s Secretary, Sergei Zheleznyak, said.

“In the Perm territory we had Governor Oleg Chirkunov for several years. His family lived in Switzerland. He flew there each weekend, State Duma member Valery Trapeznikov, of United Russia, said. The legislator said it was a great annoyance for the general public, and the industrial workers, with whom he had discussed the idea of more restrictions civil servants would have to abide by enthusiastically welcomed the idea.

As the fund Obshestvennoye Mneniye (Public Opinion) has found out, the people would like to see very harsh measures against officials. The ban on bank accounts and properties abroad received approval from 66 percent of the polled, and only ten percent said they were against; 26 percent of the polled believe that such a law is necessary to stop capital flight from the country, and 16 percent are certain that the money the officials take out of the country are of corrupt origin. Of those critical of the law a tiny four percent said that the question where to keep one’s money was a private affair of each individual.

This is a new vector in the Kremlin’s policy, says first deputy president of the Political Technologies Center, Alexei Makarkin. “The authorities are afraid of outside pressures on their future, particularly so, in the wake of the Arab revolutions, when elite members refused to support their leaders,” he said. Makarkin believes that the general idea is “the elite should be short-circuited to Russia, with no chance of getting anywhere, and all resources kept under control.”

In the meantime, some officials are in no mood to sell the real estate they have abroad or leave the civil service in case of a ban on assets, including accounts in foreign banks. Most civil servants will simply re-register foreign homes and apartments to third persons, as follows from an opinion poll held by the Business FM radio station. Legislator Mikhail Slipenchuk said he would re-register his apartment in the Cannes in the name of his parents.

Incidentally, experts have already found loopholes in the bill. Real estate in other countries is normally registered in the name of legal entities, which allows for managing and renting it. The end beneficiary at the end of the chain is very difficult to track down. Besides, the bill makes exemptions for civil servants paying for education and medical services. An official or a member of his family may open a bank account on the excuse of paying for accommodation and medical treatment in a foreign country.